The U.S. Supreme Court has told GM that it will have to face the potentially billions of dollars in multiple legal claims after installing a deadly ignition switch in their cars. GM argues they were ‘free and clear’ of liability and use their 2009 bankruptcy sale as an appeal.
The justices overseeing the issue left no comment in the federal court appeals ruling which stated any accord of bankruptcy would not protect GM from accidents, and any following claims, that happened before the sale. Lawyers of plaintiffs estimate current claims total for nearly $10 billion dollars. This number could increase should there be more lawsuits to follow.
This ruling is another setback for Mary Barra, the GM Chief Executive Officer. She has already experienced woes within the company. In her first year, her role as CEO was heavily occupied by the ignition defect which is directly associated with at least 124 deaths and recalls of 2.59 million cars. One financial analyst says there is a finite risk which will require GM to reconsider buying back stock or paying out its
As the largest auto maker in the U.S., GMs lawyers pointed out a bankruptcy law that says the purchaser of a debtor’s assets must be responsible for liability. Thus GM should be held free and clear. The appeals court stated the federal provision will not protect GM because the company was aware of the flaw prior to filing for bankruptcy. Moreover, they failed to notify any affected customers; thereby, can be held responsible for deaths or injuries associated with the defective part. The court continued to say that forbidding such suits would violate the due process clause held within the Constitution. As quoted by the appeals court: “New GM essentially asks that we reward debtors who conceal claims against potential creditors,”
The federal appeals court ruling, was made in July 2016, also resurrected suits which had been filed by a post-sale buyer who claim they would not have purchased the vehicle had they known about the defect. Plaintiffs argue GM made little effort, and moved slowly, to recall vehicles which jostled keys could lead to the shutting off of brakes, air bags, and steering. GM maintains that top executives didn’t know about the issue; however, the company did admit to knowing about the defect in 2005 yet concealed it from regulators between 2012 and 2014.
GM says the ruling undermines one of the most prominent bankruptcies in US history. A company spokesman says the Supreme Court’s ruling “doesn’t change the landscape much in terms of the GM litigation,” Those who continue with a lawsuit must show the right to file a claim and still be able to prove merit.
The leading lawyer of the Plaintiff’s has said GM “can hide no more,”, “These cases are factually some of the most tragic stories, and also some of the strongest in terms of clear liability of GM’s intentional misconduct,”, “Each case will soon be sent back to its local venue and each one will be tried to a verdict.”
GM claims that most of the lawsuits do not have any merit. They also dispute statements made by lawyers of the Plaintiff’s who say the total amount of liability reaches the $10 billion mark.
The truth of the matter is that more than likely GM will have to pay something. More on this story as it unfolds.